Balance Across Firms: Exploration and Exploitation in Alliances Between Platform Participants

Abstract

The literature identifies four modes of balancing exploration/exploitation activities within a single firm. We develop a framework for examining alliances noting that whether an alliance represents exploration or exploitation for a partner depends on the activity relative to that partner’s past activities. Balancing these activities across firms in distinct domains can achieve the benefits of multiple modes while avoiding some pitfalls. We find that alliances in which one partner explores while the other exploits outperform, on average, those alliances in which partners conduct symmetric activities. Also, alliances with both partners exploiting outperform those when both partners explore. Bridging the longstanding exploration/exploitation literature to the platform literature, we also develop and test hypotheses about the relationships among alliance performance, platform characteristics and partnership characteristics.